1. The phenomenon of “small profits and big losses” in trading
In the process of cryptocurrency contract trading, we often observe that many traders' account funds are constantly declining. Although they may have ten profits, they are always offset by a large loss. What is the reason behind this phenomenon? Why do traders always fall into the vicious circle of "small profits and big losses"?
2. Unable to hold on to profits and able to withstand losses
Many traders will experience a phase of "small profits and big losses" when they first enter the market. This is mainly because they are always eager to cash in when they make a profit, but choose to hold on to losses, hoping that the market will reverse. Or, they will choose to increase their positions in the hope of recovering their losses through a reversal, but this often goes against their wishes and ends up causing greater losses.
3. The Importance of Position Management
To break the vicious cycle of "small profits and big losses", position management is a key breakthrough. Position management, also known as "fund management", is a defensive art. It aims to ensure that traders pursue victory after they are in an invincible position.
4. Principles of Position Management
1. Never put all your money into the market: Especially for novices or traders who have been in a state of "small profits and big losses" for a long time, investing all your money will only magnify the losses and affect your mentality.
2. Fund security after consecutive losses: After consecutive losses, the remaining funds should still be able to support the same number of positions to avoid trading restrictions due to reduced funds.
3. Scientific strategies for increasing and decreasing positions: The market is constantly changing, and the trader's winning rate and profit and loss ratio are also changing accordingly. Therefore, position management needs to include flexible strategies for increasing and decreasing positions.
5. Popular Money Management Models
There are many models of money management, but the following three are the most popular:
1. Fixed and flexible lot models: The fixed lot model is simple and easy to understand, but it is risky. The flexible lot model dynamically adjusts the number of lots to be opened based on the total amount of funds in the account.
2. Fixed risk ratio model: Set the loss risk ratio for each transaction, such as 3%, to control the maximum loss risk.
6. Execution and Discipline
In position management, the best state is to execute it completely according to the designed management mode without being affected by any subjective factors. This requires traders to formulate detailed strategies and implement them through strict discipline.
7. Summary
To break the vicious circle of "small profits and big losses", traders need to pay attention to position management and follow scientific principles and strategies. At the same time, they also need to have firm execution and discipline. Only in this way can they move forward steadily in the trading market and achieve long-term profit goals. I wish you all achieve wealth freedom as soon as possible.